Median Incomes Fell for All But Richest in 2010-2013, Fed Says

Only the richest Americans saw saw their incomes benefit from the
economic recovery during 2010-2013, as earnings stagnated or fell for
all others, a report from the Federal Reserve showed today.

Median
income adjusted for inflation rose 2 percent to $223,200 for the
wealthiest 10 percent of households from 2010 to 2013, the Fed said
today from Washington in its Survey of Consumer Finances. The bottom 60 percent saw the biggest declines.

The
improvement in consumer finances has become increasingly stratified
during the recovery, thanks in part to gains in the stock and housing
markets that have been boosted by the Fed’s unprecedented stimulus.
Meanwhile the labor market has been slower to progress, with wages
remaining stagnant for many workers, aggravating the disparity in
income.
The report “reveals substantial disparities in the evolution of income and net worth” since 2010, Fed economists wrote.

The
median, or mid-point, income for all families fell 5 percent from 2010
to 2013, while mean, or average, income climbed 4 percent, the data
show. That’s “consistent with increasing income concentration during
this period,” the report stated. Median net worth fell 2 percent to $81,200 from 2010 to 2013, while mean net worth was little changed at $534,600.

The 2013 survey found that gains in income and wealth aren’t confined to just the top 1 percent of families.

Top 3%

The
Fed data showed that the share of income received by the top 3 percent
of families rebounded to 30.5 percent in 2013, from 27.7 percent in
2010. For the next highest 7 percent, though, the share of income hadn’t
changed during the previous quarter-century, “sitting slightly below 17
percent” in both 1989 and 2013.

Households with access to
assets such as homes and stock portfolios have found their wealth buoyed
over the last three years. The Standard & Poor’s 500 Index (SPX)
climbed 47 percent in the three years ended December 2013, while the
S&P/Case Shiller index of property values climbed 13.4 percent in
the same time period.

Americans without such assets may have
found the recovery in their finances slower-going, due in part to a
labor market that’s been gradual in gaining momentum. With a
“substantial degree” of labor market slack, “the need for extraordinary
accommodation is unambiguous,” Fed Chair Janet Yellen said in an Aug. 22 speech at the Kansas City Fed’s economic conference in Jackson Hole, Wyoming.

Wage Income

The
top 10 percent of families by wealth got 46.7 percent of their pre-tax
income from wages in 2013, down from 55.8 percent in 2010, the survey
found. The share earned from capital gains climbed to 10.6 percent from 2.3 percent.

That
compares with the 73.7 percent received from wages by the poorest
households in 2013, a decrease from 75.9 percent three years earlier.
Those families received less than 0.05 percent of their incomes from
capital gains last year.

There were also disparities in changes
of median and mean family business equity. The survey showed that median
family business equity fell by 20 percent. The mean value of business
equity rose 15 percent.

“This change indicates that losses in
business equity were not equally distributed, and many business-owning
families experienced large gains, while the median business-owning
family experienced a loss,” the report said.

Retirement Accounts

The
proportion of families with retirement accounts decreased 1.2
percentage points to 49.2 percent during the three years ended 2013,
according to the report. The decline was driven by those in the bottom
half of the income distribution, while participation among families in the top 10 percent increased.

Households
have spent much of the economic expansion cleaning up their balance
sheets, and many remain cautious about taking out more loans. The share
of families holding any type of debt declined to 74.5 percent in 2013
from 74.9 percent in 2010, while the median value of the debt fell 20
percent to $60,400.

The share of those with mortgages or other
home-secured debt declined to 42.9 percent from 47 percent in the same
time frame. That overshadowed a drop in the percentage of families who
owned a home, which fell to 65.2 percent last year from 67.3 percent in
2010.

Credit-Card Debt

Credit-card debt as a share of
household borrowings was at 2.4 percent, a record low in data from the
consumer finances survey going back to 1989. The median family credit
card balance was $2,300 last year, down from $2,800 in 2010.

Fed
economists conduct the survey once every three years to produce a
snapshot of household balance sheets, pensions, income and demographics
that’s more detailed than broader reports about the economy. The surveys
allow comparisons over time, with consistent methodology since 1989.
A
Labor Department report tomorrow may show U.S. companies added 230,000
jobs last month after a 209,000 gain in July, according to the median
forecast of economists surveyed by Bloomberg. The unemployment rate probably fell to 6.1 percent in August from 6.2 percent the month before.
To contact the reporters on this story: Victoria Stilwell in Washington at vstilwell1@bloomberg.net; Craig Torres in Washington at ctorres3@bloomberg.net